Employers and employees can, by mutual agreement, terminate an open-ended employment contract by using a mutually agreed termination approved by the labor administration. Within this framework, the employee must receive an indemnity at least equal to the statutory or collectively agreed redundancy payment. Such an indemnity is also due to employees placed into involuntary retirement by their employer. Consequently, the specific contribution payable by the employer on the portion of mutually agreed termination and involuntary retirement indemnities exempt from social security contributions has increased since January 1, 2026.
Clarification: The mutually agreed termination indemnity must correspond to the collectively agreed redundancy payment (if it is more favorable to the employee) in companies belonging to professional sectors represented by the Medef, the CPME, or the UPA.
A Contribution Raised to 40%
The mutually agreed termination and involuntary retirement indemnities paid to employees are exempt from social security contributions within the dual limit of twice the annual Social Security ceiling, i.e., €96,120 in 2026, and the highest of the following three amounts:
- the statutory or collectively agreed redundancy payment;
- 50% of the indemnity granted to the employee;
- twice the gross annual remuneration they received during the calendar year preceding the termination or involuntary retirement.
However, the portion of the mutually agreed termination or involuntary retirement indemnity that is exempt from social security contributions is subject to a specific contribution borne by the employer.
To combat “the increase in optimization practices in employment contract terminations,” in other words to avoid “strategies to circumvent the social security regime specific to redundancy or resignation payments,” the public authorities have increased the rate of this specific contribution by ten percentage points. The rate has therefore risen, as of January 1, 2026, from 30% to 40%.
Exception: This contribution is not payable by the employer in the case of involuntary retirement of an employee hired under a Recognition of Prior Experience scheme
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